Irish manufacturing slipped deeper into recession in May, according to the latest purchasing managers' index (PMI) which deteriorated for the eighth consecutive month.
The NCB stockbrokers' PMI slumped nearly a point to 47.5 from 48.2 for April. Crucially, it continues to languish beneath the 50 mark dividing growth and contraction.
Analysts blamed the sharper-than-expected decline on the slide in exports caused by the surging euro.
But they cautioned against reading too much into the figures, stressing there is no evidence the Republic is heading for recession.
The services sector PMI, published tomorrow, offers a more accurate gauge of the economy, according to Mr Dermot O'Brien, NCB chief economist.
Cooling input costs - the input index fell to 49.1 from 53.4 for April - provided grounds for optimism, he added.
"Activity is showing no sign of a post-Iraq bounce with a further decline in the PMI in May.
"While the strength of the currency was cited as a factor curtailing export orders, both input prices and output prices were under downward pressure," he said.
This, at least, is an encouraging development," Mr O'Brien said.
The labour market bore the brunt of the downturn, with the employment index dipping to 47.1 - the ninth consecutive monthly deterioration.
Lack of new business was the most common reason for lay-offs - new orders continued to soften, at the fastest rate since December 2001.
The rising euro's impact on competitiveness was underlined by the fall in exports to 44, only marginally less than April's 18-month record contraction in the sector.
The results are in line with other euro-zone economies.
The Reuters PMI for the 12-nation bloc slipped to 46.8 in May from 47.8 in April instead of rallying to 48.2 as economists had predicted in a poll last week.
"The strength of the euro was seen to have damaged export performance, but benefited manufacturers through a reduction in prices paid for imported inputs," said NTC Research, which compiles the survey.
Cheaper imports and lower oil prices in the wake of the Iraq war pushed the input prices index to 48.2 in May from 56.2.
The output index dropped to 48.6 from 49.4 in April and the new orders index collapsed to 45.6 from 47.2.
The sharpest falls seen in Germany, the euro-zone's biggest economy.
